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Allan Barber reports that the large-employer group of meat processing companies are fearful of what the Fair Pay Agreements will bring for productivity and flexibility. They remember the grim relationships before 1991

Allan Barber reports that the large-employer group of meat processing companies are fearful of what the Fair Pay Agreements will bring for productivity and flexibility. They remember the grim relationships before 1991

The Fair Pay Agreements Working Group report contains some horribly familiar concepts which remind me strongly of the days before the 1991 introduction of the Employment Contracts Act and its 2000 successor the Employment Relations Act. It is supremely ironical the chair of the Working Group, Sir Jim Bolger, was Prime Minister, previously Minister of Labour, at the time the ECA was passed into law.

The Great Helmsman, as he was nicknamed, has shown great flexibility throughout his career, having initiated the referendum on MMP, served as Ambassador to the United States and been appointed by Labour to chair several SOEs and working groups. The outcome of his latest role suggests a well-deserved retirement may be overdue.

Analysis of the Fair Pay Agreements recommendations indicate any industry is at risk of being required to participate, provided 10% of the workforce or 1,000 workers in that industry vote in favour of negotiations, with the employers having no choice in the matter. The purpose of FPA legislation would be to lift the wages of workers in low paid sectors, most of which are likely to be either local or national public service, but it does not require much imagination to see a similar situation arising in the private sector to the detriment of industry competitiveness.

The proposed introduction of FPA appears to be ideologically, not practically driven, as a gesture of solidarity by a Labour government towards the union movement which still retains a strong element of control over the party. In coalition with New Zealand First before last year’s Election, there was no chance the government could bring in FPA, so the new Minister of Employment Relations, Michael Wood, has seized the opportunity of a large majority to work towards putting a bill before Parliament by the end of 2021.

BusinessNZ was represented on the working group, but has since withdrawn its support for the final report, stating it contains several elements of concern, notably the return to pre 1991 award systems which impose compulsory outcomes on both parties and the focus on equality at the expense of productivity and efficiency.

While some of the more draconian provisions of the ECA were modified by the ERA, there will be no private sector businesses that would support the backward move to the bad old days when strikes were frequent and companies were forced to close for days or weeks at a time, before the parties reached a grudging agreement. The meat processing industry is a prime example of one in which systemic inefficiency had been preserved by a combination of farm subsidies, union power and ageing infrastructure.

Meat works occupied huge areas of land, housing slaughter chains designed to process on single shifts more livestock than was profitably available, with minimal further processing facilities and too much freezer capacity. Great Britain’s entry into the Common Market which led ultimately to the removal of subsidies by the 1985 Labour Government was the trigger for a major reduction of livestock, rampant procurement competition, capacity closure, workforce layoffs and company receiverships and takeovers.

The ECA and its successor ERA have made possible what was painful, but inevitable. The meat industry which has evolved over the last quarter of a century could never have arrived where it is today, if unions had retained their previous powers under the law. The industry employs a workforce of 25,000 in a wide variety of jobs, including slaughtermen, boners, butchers and cold store operators. Many of these are covered by collective agreements, negotiated with their union representatives, while others are employed on individual contracts. All of these agreements pay above the minimum wage and provide fair terms of employment. Meat Industry Association CEO, Sirma Karapeeva, says FPAs would be totally unsuited to meat processing which is spread across the whole country under a variety of different union or individual agreements covering a wide range of jobs. She sees this as tilting the field in favour of unions, as well as being about centralisation of control.

Earlier this month the New Zealand Initiative stated there is no evidence New Zealand’s employment settings or wage rates would benefit from the “flawed FPA recommendations” of the Working Group, but on the contrary average wages are increasing faster than inflation across all deciles and are not being bid down by employers. The only beneficiaries of implementing FPAs would be the unions.

BusinessNZ has produced a commentary in response to the Working Group’s report which offers a series of alternatives to the recommendations with two overarching principles: firstly, participation is voluntary and secondly, FPAs are industry/sector/occupational Codes of Practice that become binding on parties that sign it, like Collective Agreements. The alternative approach proposed is less prescriptive than the Working Group report, but provides guidance to the participants on the clauses that would be binding and who would be bound by them.

Apart from the obvious conclusion about paying its dues to the union movement, it is hard to see what the government hopes to achieve from introducing FPA legislation. The stated reason of reducing inequality does not appear to stack up against the disadvantages of reduced productivity and efficiency, especially when a relatively small range of mainly public sector occupations is involved.

The government would be better occupied in building bridges rather than hijacking private sector employers, particularly agricultural businesses which consistently demonstrates their value to New Zealand’s current and future prosperity.


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28 Comments

14
up

What a great story - perfectly illustrating how big business fights for the right to mercilessly exploit people, animals, and the natural world to sustain profits and growth.

10
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Not really. More an example of how the woke think you can legislate value in excess of the value of the said worker.

Ridiculous comment when considering most employees are also consumers of those businesses in one way or another.

The reason so much credit pumping is needed to keep our economy afloat is this undercutting of workers' value by "non-woke" has reduced the purchasing power of the median worker to such an extent.

Not sure how can one undercut the value of a worker?
If the value is undercut, then surely take your skills elsewhere?
Or perhaps gummit could set minimum prices for some products so the business can charge more, pay staff more and not worry about loosing customers to the opposition?
That should sort it.

Yep rastus, the minute "gummit" sets a price on anything we are in trouble. Remember Muldoon?

Sadly, legislating the value of 'said workers' has proven absolutely necessary in most capitalist economies. I wonder why.

overlooking of course the consequence of this legislation is that the economic base of the West has been gutted. Or have you not noticed this shift?

I grew up in a mining town in England that was gutted by a toxic combo of cheap Aussie coal and a Government intent on smashing the unions! I've seen the shifts!

Big money capitalists hunt relentlessly for profit maximisation - and they do this on a global scale. The solution to this predatory behaviour is not to rollover and sacrifice the wages and conditions of NZ workers.

Yes. Some will remember Arthur Scargill and how he held the country to ransom. Typical case of a union getting too big for their boots. Local Trade unions no doubt hanker after those days.

18
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Yes the dark ages of 1991. Times best to be forgotten & not discussed at all. Times when the average working class kiwi could afford a house on an average salary. Times when one income could support a family

Bloody dreadful situation, alright, it's a wonder anyone made it out alive.

We live in a strange world where global tech firms (Amazon, Uber, Facebook, etc.) who treat their employees like crap are celebrated.

The modern anti-capitalists is someone who shares their discontent with the system on Facebook using a phone they've ordered from Amazon and Uber to a rally against the corrupt capitalists.

Not sure I understand that comment. We all use infrastructure provided by people or companies that we might not 'celebrate'.

It was the Bolger/Birch National government that introduced sweeping reforms to employment law and thereby redefining the relationships between employer & employee. Regardless of whatever side you were on, it cannot be denied that industrially things settled down and whats more, remain much more settled than prior to that time. May have this wrong but understand that Ex PM Mr Bolger is now involved in an advisory group, yes there just has to be one of those doesn’t there, targeted with dismantling the present legislation. If that is so, wonder how the elder Mr Bolger goes about telling the younger Mr Bolger he was wrong?

Jim Bolger explains in this interview how wrong he was in terms of neoliberalism and what damage he now sees that ideology wrought on NZ society;

https://www.rnz.co.nz/programmes/the-9th-floor/story/201840999/the-negot...

Businesses throwing tantrums on being asked to pay livable wages to their 'working poor' staff often use lack of productivity growth as an argument here.
The reality as found by numerous reviews into the matter that wage growth in NZ hasn't kept pace with productivity increases, especially since 1990 .

For the first two decades since labour reforms were introduced in NZ, productivity grew 4x over wages with much of that gain going to boost returns for capital owners.

Yes.

Donny11 and advisor - In that era there were benefits for the average worker a very average house normally 100 sq meters or less could be achieved on 1 income during the 50s,60s,70s. There was no discretionary income and nothing to spend it on. Unions gained excessive power and held the country to ransom, meat workers, cook straight ferries etc. The out come was something had to change so union power was destroyed. Like many changes it went to far so aiming for a more even middle ground would be truely beneficial to our country. I hope we don't over shoot back to far into the past. Some of the new legislation forcing collective negotiation no matter what size or geographical location industry is based is dangerous in my opinion I hope common sense for a sensible outcome for all can be achieved.

Sorry pressed report by mistake bit clumsy

Indeed it did go too far - zero hour contracts and all.

I agree it went too far in some ways, but not far enough in others. Friedman would not have agreed with how neolib was done here, because here the government created distortions while freeing up other parts of markets. The RMA is one are where the government went backwards - they freed up a whole lot of things then created an artificial shortage of land.

I guess the meat factories will have to remodel their operations into a a capital intensive structure. Automation will be key, that should reduce a substantial workers required.

3 paths lay ahead for the industry, automation, spin-off and diversification.

Spin off can take the form of selling the business and take a stake in the company, completely or sub contract all labour force to an external labour management company with all employees except the management being on casual basis - de-risking.

Diversification can be the form of investing in another growth industry and winding down the current operations.

Management and shareholders will need to act soon.

Here's your problem with your solution, machines won't buy what you produce

It's quite simple.

A) An Employer is a monopoly provider.

B) Where there are no unions employees are individuals and have no market power

C) A+B = shareholders and management extract excess monopoly profits

D) There is no place for monopoly providers in capitalism unless they are regulated.

E) Thus Employees have to have the right to unionisation.

F) A+E = oligopoly (at least better than a monopoly) with 2 more equal participants.

It is unfortunate that an equitable bargain couldn't be struck between capital and labour without resorting to regulation changes but it's been clear for many years that the decoupling of real wage growth from productivity was likely to eventually lead to a tipping point. Investors will be aware that the outcome was inevitable given the trajectory.

.

So is 10% now called a majority, or 1000 workers in an industry, a number which is designed to be even less in % terms of that industry. Inversely that means that 90% or more are not in favour.

What's with the huge flock of Communists to interest.co.nz? Comments are becoming hilarious.